I’ve coached over 1,000 entrepreneurs in my business coaching practice, and millions more entrepreneurs have benefited from my apps, courses and other resources. I noticed a few common patterns in my large sample set of data when it comes to social entrepreneurship. There is a strong theme of young entrepreneurs who want to give back to their communities with their businesses, which is great. What’s sad is that due to improper business fundamentals, most of these entrepreneurs don’t succeed with their businesses, and are not able to truly give back. They often fail because they put the carriage in front of the horse, and although they start their business for great moral reasons, their businesses often lack solid fundamentals that all businesses require to succeed.
MANAGING YOUR EMOTIONS
It is also important to highlight the role of enthusiasm in starting a business, especially social-good businesses. Psychologists and emotional intelligence experts often cite enthusiasm as one of the top emotions for work. But they also note that the negative aspect of enthusiasm is that it causes people to underestimate challenges and overestimate themselves and the quality of their ideas. In social entrepreneurship this often means lots of daydreaming about the glory of helping one’s community and a lack of hard work or proper fundamentals.
Another dead giveaway of improper business fundamentals is when the business pitch starts with how the business or entrepreneur will give back to the community they want to benefit rather than what the product, how the business helps someone, or any concrete business strategy outside of its social good aspect.
THINKING ABOUT YOUR THE NATURE OF YOUR CLIENTS AS A SOCIAL GOOD BUSINESS
One common issue that sets social good businesses apart from traditional businesses is that social good businesses often focus on markets that are in need. Other businesses often try to focus on affluent markets where people have extra money to spend. This creates a challenge for social good businesses because those business often target people who have little extra spending income, which creates a need for even more solid business fundamentals and more careful business planning and strategy.
Even if a regular business like an app or a store donates 10% of its profits to a cause of their choice, it should first and foremost focus on the growth of that business to make it a strong and sustainable business. That way, the 10% of the money it gives back can be a larger sum that can be given away for a longer period of time. Even if the business is directly a social good business that does business within a community, it should still have a solid strategy for how it will generate money and how it will grow.
I end up having to police my young social-good entrepreneurs to make sure they start with proper business planning and solid fundamentals. Luckily, with proper guidance, this isn’t too difficult. In fact, I came up with a new and very easy way to plan a business.
Traditionally, part of the reason many first-time entrepreneurs failed to create a solid business plan was because business planning is a confusing and tedious process that leads to frustration and quitting. So I narrowed the business planning process to help people get started very easily. I first have people create only a 3-sentence business plan that they later expand into a 1-page business plan after which it isn’t too difficult to expand to a full business plan.
The 3-sentence business plan is something only I do. It is my own innovation in the business planning world and my business plan book where I cover this in detail is getting adoption in some US universities, the largest of which is University of Kentucky’s entrepreneurship center. I created this concept after noticing that while different businesses have different aspects of them that are more or less important, every business has three aspects to them that are unavoidable, and make up the core of the business. Those three aspects are 1) the product or service itself 2) business growth, which is sales and marketing and 3) financials.
Here is an example of a 3-sentence business plan:
I am building a mobile app that will help entrepreneurs by allowing them to plan a business right on the app. I will promote the app with app store search, publicity and social sharing. The app will make money through in-app purchases.
The 3-sentence business plan does two things. First, it makes it very easy for an expert to catch strategy mistakes. Second, it helps the entrepreneur focus on the nucleus of their business. For example, if the second sentence of this business plan didn’t contain ASO (app store search optimization) it would be very easy for an expert to spot that mistake since for most apps, most downloads come from search. That would make it very easy to redirect the entrepreneur back onto the right path with their business by pointing to obvious holes in the core of their business plan that they can then go and fix.
It turns out that it is quite easy to turn a 3-sentence business plan into a 1-page business plan because you only need to add a few more brief sections and bulk up the three main parts of the business plan with a few more sentences too. What’s great about the 3-sentence business plan is that no matter how much you beef it up and extrapolate it, the core of the plan is contained in the original three sentences. The core of the the product is contained in the first sentence. The core of the marketing strategies is contained in the second sentence, and while the finance section does need to be expanded for social-good businesses, the bulk of the bigger business plan is made up of footnotes and extrapolations to the original three sentences.
For social-good businesses that operate in less affluent communities, it is often much harder to generate revenue and operate the business profitably. For example, I recently had a client that had a business that focused on getting people in poor neighborhoods to quit smoking and handle other addictions through therapy and other methods. While the premise is great, the monetization strategy was the most difficult part of that business because most people want the benefit of ending their addictions, but few people have money to pay for therapy. So we had to find ways to subsidize the costs and bring in sponsorships and grants which made the monetization part of the business much more difficult than it would be for other therapy businesses.
If social entrepreneurs focus on the core fundamentals first, they will be creating stronger and more sustainable businesses. Those businesses will be able to earn more money, and have more resources which they can use to give back to their communities.